There are far fewer good reasons for a home loan remortgage than there are bad reasons. A remortgage is a financial instrument and its use should be treated with respect. Using it the wrong way can have catastrophic consequences. You might ask, what is the purpose of having a house with equity, if I can’t use it for what I want? Security. Having your own home guarantees you will never be homeless. It guarantees you will always have a place to live.
So what are the good reasons for a home loan remortgage? Reducing the interest rate you are currently paying. Obtaining better loan terms that work out in your favor; both in the short and long run. Remortgaging should only be used to place yourself in a better financial position.
The problem is that most people buy the biggest house they can possibly afford. This means that they strain themselves financially in the beginning. They have to have two incomes just to make ends meat. If anything goes wrong they are in a world of trouble. Most people use debt irresponsibly. Adding more, newer debt just compounds the problem.
So when they go to remortgage their home it never really makes sense, financially. So, for most people, the only good remortgage is one that places them in a better financial position than they are already in.
What if you were financially responsible. Both you and your partner, individually, could easily pay your current mortgage. You have a lot of built up equity in your home. And, you would like to build an extension onto your house or remodel a bathroom or add a pool. In this scenario it would be a good use of the funds. I wouldn’t do it.
The point is that your house is not a piggy bank, and it should not be used like one. Just because the equity is there does not mean it should be used. If you have been financially responsible and use restraint then it is okay to pull equity out every now and then, for whatever reason. The problem is that most people are not financially responsible and do not show financial restraint.
Bottom line, if you are not financially responsible then there is never a good use for a home remortgage except for the most dire reasons. On the other hand, if you are financially responsible there are a lot of possible good uses of a home loan remortgage.
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To get a better interest rate: This is probably the most common reason for remortgaging a home loan. First time home buyers, borrowers with poor credit, or other adverse characteristic may have had to agree to an interest rate or unfavorable mortgage terms due to problematic aspects of their loan application.